Invest Like the Best with Patrick O'Shaughnessy - Kirsten Green - Investing in Consumer Change - [Invest Like the Best, EP.301]

Episode Date: November 1, 2022

My guest today is Kirsten Green, founder and managing partner at Forerunner Ventures. Kirsten launched Forerunner in 2012 and has built it into a leading consumer-focused venture firm with early investments in consumer brands like Dollar Shave Club, Bonobos, Faire, and Warby Parker. Our conversation is an exploration of consumer behavior and how to invest behind change in our society. We also discuss frameworks for identifying brands early, how to build deal flow, and the shift in power between buyers and sellers. Please enjoy my conversation with Kirsten Green.   For the full show notes, transcript, and links to mentioned content, check out the episode page here.   -----   This episode is brought to you by Canalyst. Canalyst is the leading destination for public company data and analysis. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com.    -----   Today's episode is brought to you by Brex. Brex is the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest-growing companies. With Brex, you can move money fast for instant impact with high-limit corporate cards, payments, venture debt, and spend management software all in one place. Ready to accelerate your business? Learn more at brex.com/best.   -----   Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes.    Past guests include Tobi Lutke, Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @patrick_oshag | @JoinColossus   Show Notes [00:02:35] - [First question] - The insights gleaned from studying consumers in the modern era [00:07:02] - Whether or not the shift in consumer behavior is similar to a platform shift like mobile [00:09:58] - Which of her hypothesis going into the research was proven most wrong [00:11:31] - The leading persona archetype that drives consumer spending  [00:13:58] - Thoughts about her investing focus after doing all of this research  [00:16:23] - How much the digital world is good and bad for community [00:18:50] - Positive and negative impacts digital access has on children [00:21:17] - The investing criteria that she and her firm have developed for founders and business models they find desirable  [00:32:00] - The beachhead problem for entry points, encouraging good focus and entry point selection, and who’s done it well  [00:35:33] - The history of the consumer of how they buy and sell and where the shifts in power have been  [00:39:47] - Other interesting trends she’s seeing in the seller empowerment era [00:43:35] - How different her investing models are for linear product businesses [00:46:45] - Frameworks she’s developed for evaluating a brand early on  [00:49:57] - The most defining moment in Forerunner’s history and the hardest lesson she’s had to learn  [00:53:13] - Ways she’s fostered and mentored young investors at Forerunner  [00:54:04] - What the most underappreciated thing is today about the consumer [00:54:50] - User and customer development strategies that work well for early stage products [00:56:26] - Three businesses young investors should study to educate themselves on great consumer businesses; Shoe Dog [00:59:49] - Where they find the companies Forerunner tends to invest in, and how to build and effective deal flow pipeline  [01:05:07] - The kindest thing anyone has ever done for her

This episode of Invest Like the Best is sponsored by Canalyst. Canalyst is the leading destination for public company data and analysis. Founded by a former byside analyst who encountered friction sourcing, building, and updating models, canalyst is now used by over 400 institutions, including the largest money managers globally and by a number of guests on the show. With detailed company-specific models and data on virtually every public company, panelists clients are able to ramp up faster, update models instantly, and incorporate the highest quality fundamental data into any workflow. If you're a professional equity investor and haven't talked

to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalist.com slash Patrick. That's C-A-N-A-L-Y-S-T-com slash Patrick. Today's episode is sponsored by Brex, the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest growing companies. With Brex, you can move money fast for instant impact with high-limit corporate cards, payments, venture debt, and spend management software all in one place. Ready to accelerate your business, learn more at brex.com slash best. That's bR-e-X.com slash best. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best.

This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest like the Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at join colossus.com. Patrick O'Shaughnessy is the CEO and founding partner of Positive Sum and the CEO of O'Shaunacy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum or O'Shaunacy Asset Management. This podcast is for informational purposes only.

and should not be relied upon as a basis for investment decisions. Clients of positive sum or Oshonacci asset management may maintain positions in the securities discussed in this podcast. My guest today is Kirsten Green, founder and managing partner at Forerunner Ventures. Kirsten launched Forerunner in 2012 and has built it into a leading consumer-focused venture firm with early investments in consumer brands like Dollar Shave Club, Bonobos, Fair, and Warby Parker. Our conversation is an exploration of consumer behavior and how to invest behind change. in our society. We also discuss frameworks for identifying brands early, how to build deal flow, and the shift in power between buyers and sellers. Please enjoy my conversation with Kirsten Green.

I've been thinking about our conversation for the last several days and the many directions that we can take it. And I think because you and your firm have such differentiation in the understanding of the consumer, what we'll call the consumer often through this conversation, it would be fun to begin with something you and your firm have been working on fairly recently, which is a huge, I guess I'll call it a study of consumer trends, passions, interests, preferences, and so on. I'll leave it to you to describe what that study is, but I'd actually love to begin with the insights that you've gleaned so far from studying the 2022 consumer. Thanks for the question on one of my favorite topics.

Fascination with the consumer, fascination with users, fascination with people's behavior has been the guiding light throughout my investing career, and one of the foundations foreigner was started on. This year we're celebrating our 10-year anniversary. And we felt like as a team, given that it was a decade marker, we felt like it was a moment where let's really put our heads down and reassess the consumer. So this is a project we've been working on since the very beginning of the year, even the fourth quarter of last year. And we started with a couple of hypotheses about people.

And we took those into kind of some pretty tailored surveying. Surveys led to questions, more questions. when did some focus groups. And then over time translated that into a much broader base survey. And this was all of an effort to collect a robust set of data, make sure that we had a broad representation of people, because we were really trying to do is get in the heads of the collective American. The global population certainly matters, but let's start with our own country, because it's plenty dynamic, the most dynamic. And then we took all of that information, and we put it against economic data and we put it against credit card data and packaged it in a way where we said,

here are 12 archetypes and across the 12 archetypes, we can more or less fit everybody into them. And we meant for them to be much more psychographically driven than age or financially driven. But of course, they end up having, you know, they skew different ways like that. It was fascinating. we debunked a lot of our preconceived notions coming into it. We validated more of them. But we definitely walked away with there is so much change happening right now. It's about structural change in how we live our lives.

The good news is that there's a lot more freedom in what that looks like. There's a lot more ways to educate yourself. There's a lot more ways to have a relationship, to have a family, to have a career. So that's exciting because it allows for a lot more individuality. but human nature is people want to know how they're doing. They want to know how they're doing. People look around and say, how am I doing on some kind of a relative basis? And that equation has gotten so much more complicated because of the free-flowing nature of everything. I think about when I started my career, or even when I was leaving my parents' house for the first time, it was a no-brainer.

I was going to a four-year college. When I got out of college, it was a no-brainer. I was going to a job Then I got a business card that I had an office and there was some training involved and I was going to do what someone told me. And at some point I was going to hopefully get a promotion. I was going to hopefully find somebody and get married. I would hopefully buy a house. I'd have a kid. There was like a path to follow. I think that that provided direction and it provided frameworks for people to work in. And I think that sometimes you felt better about yourself, how you were doing against it and sometimes you challenge yourself. Today, we don't have that as much. that is unnerving people by and large and people are feeling like how am I going to satisfy

still my curiosity and how I'm doing. What's my purpose here? Am I set up for success? If I'm not set up for success. So there's a lot of anxiety and there's a lot of desire for things like mentorship. There's a lot of desire for different elements of security, whether that's finances or whether that's even thinking about your own health. Some of these things people are taking into their own hands in a more proactive way, and that's really great. But it's just a lot of change. And obviously, from an investor perspective, a lot of change is good because it's opportunity. I like to think from a population standpoint, change is good because we're going to evolve. But there's some real challenges right now, too. If you think about all the shifts or potential shifts that you observed in the data,

and we compare those shifts to like a new technology platform that is enabling for lots of new businesses, So everyone talks about like mobile or cloud or whatever being classic examples of a new tech platform on top of which all these other businesses can get built. I'd love to apply that same idea to these changes that you've observed. And maybe you could pick one. And it could just be the, you know, how am I doing question or phenomenon? How do you think that applies and do you think it represents something similar to a tech shift that new businesses can be built on top of?

Are these differences big enough versus 10, 20 years ago? or when your story that you described in your career to enable a whole new batch of businesses, or is it more around the margin where existing businesses need to, you know, the best ones will take heed of this new changing trend? I actually think it's pretty structural and super meaningful, but maybe not as ubiquitous as something like a whole new platform and an operating system like mobile

that crosses very clearly across a very broad spectrum of categories. Maybe it's a bit chunkier. So, for example, health and wellness is one. Health and wellness today is something very different than health or health care was a decade ago. It was something that people thought of as I have that as responsible. I have health care. I go to the doctor when I'm sick. And then I think it's been a series of realities for people or stories for everybody about that system failing.

And at the same time, it's been much more education around how we have obesity problems, how we have attention deficit problems, any number of things. So there's much more of a highlight on like, oh, something's not working over here. And paired with a lot more information, a lot more ways to say, I'm not feeling good enough about this, or I should have more energy and you have places to go look and be intrigued for information. And usually information fuels, it's curiosity or need that fuels it. Information sparks ideas. You start to expect that there should be some way to solve something.

and that sort of is the path to laying the groundwork for there to be solutions for those things. I think in our businesses, you know, we spend something we've been talking about for a whole handful of years, the fitness trackers, the move to different kinds of physical education, even the move to mindfulness. We're still early on the journey of this whole trend really playing out. And I can't even necessarily speak to what those products or services are. I just know when we look at the need and the desire, there's a way. a ton of opportunity across that category. And also really importantly, it's health and wellness

today as opposed to health before. This idea of being proactive about your physical being and your mental being is actually new for even a big slice of the population that's still rolling out to the majority. So that's an enormous tailwind for opportunity. When you think about the list of pre-research hypotheses that you had, which one was the most wrong? There's so much conversation about climate change and about the need for changing our ways, that everybody would be interested in participating in that, particularly the younger generation. The younger generation, I mean, I have kids telling me I should, that's recyclable mom, that shouldn't go in the trash, or can you please buy an electric car instead of that gas car? When we went and looked at this data at a really

detailed level, the person that was most concerned about behaving in a way that aligned with environmental causes was a middle-aged, busy adult in a lower-income bracket. Wow. So surprising. To me, I was like, they've got too many other pressures to be thinking about this. And it's a lot of times many of those practices are still on the more expensive angle. So it was just really curious that that audience was in tune to it in a certain way. The other thing, like specifically is crypto and all this conversation that was kind of ruled the day

and 21, we sort of had this fantasy or this perception that this was a young generation really kind of fueling that fire. That also is a much more of a middle-aged person. That's bizarre. Much more of a less, has all the other attributes of somebody who's an early adopter who's techie. That was really interesting, too. And there's a list of others, but we're going to publish a report. We'll save it. We're going to show everything today. I'm really interested by the 12% and sort of who historically of those personas has driven a lot of the spending in the consumer space. Obviously, we're going to get to investing here soon. For the most part, even if it's indirect or ads or something on one of the social platforms,

you're looking for revenue from these persona groups in a consumer business. I would love you to just riff on who is it that drives the spending? And is that changing at all? So we looked at this body of work to say some of the qualitative things we've been talking about and then put an overlay around what are the size of these different archetypes and what is the spending power of these archetypes. And then what does it cost to be exists? So what's non-discretionary and what's discretionary to really understand, again, where was their purchasing power, adoption power? The other thing when we try to translate this step over into the investing and the business side

is to think about where are we on the continuum of those groups evolving. So today, they might sit in one bubble representing one set of spending power. But in five years, they're going to advance, on the spectrum in some ways, maybe in some behavioral ways and some financial ways. And we're early stage venture investors. We're trying to thread that needle between what we're really looking for is something that's going to be on everyone's mind a couple of years from now, five years, 10 years from now. It's going to have broad adoption that people are going to be like, oh, yeah, I can't remember

when we didn't have that. That's a 10-year continuum. But has enough relevancy that it can be relevant adopted today by some critical mass to create scale. And so you've got to understand where the demand is flowing. When we think about where the spending power is today, where it's going to be tomorrow, and where the push for changes, that's less surprising to people probably. On the continuum, you are looking at someone who's just out of college today,

but being much more relevant in a lot of these ways when they're parties, let's say, to the person that's midlife and going through a lot of changes. Like those are really transformative years. And so that has always been the case. That's why everybody always focuses on 18 to 45 and you get to 45 and you're suddenly like, am I relevant or not anymore? I mean, the reality is there's a ton of money, a ton of money in the baby boomer on up side. And it's a shifting profile on what's discretionary and non-discretionary.

And there's a big need there. But there's also less behavior change. So it's a complicated picture, but it's an interesting lens to put over obviously all you're investing. When you reviewed that part of this for the first time, does your mind jump to any interesting places like or theses about the investing side of the equation, meaning a new group that maybe you were under-emphasizing before in your thinking or a new opportunity to serve something like the how-my-doing question? What popped to your mind most immediately with your investing head on after you reviewed these findings? It did debunk some things and it did challenge some things that I think our team is still debating around our table about how we want to approach. But I don't know that there was anything that felt like it wasn't something that we were already sniffing, if you will.

And that gets back to kind of like we're always doing this. And so in some ways, like that felt good because if we had totally been blindsided by something, then we were missing part of doing our job. I think what I can point to is just maybe some more fuel to the fire and some more validation for some of those things that we were really kind of gnawing on and thinking about. You know, it's definitely this idea that I led with in this conversation, which is the lack of direction and how that's really challenging people. That is about are there communities people can be part of that help them be grounded in that direction or in that journey?

there's all these new tools and softwares and platforms to help enable small businesses. Are there ways to help create some measurement against a peer group or some things that sort of bring you along on that journey where people are craving some of that? I think that there's clear, when you think about stepping back, this idea like I'm searching for purpose, I'm searching for a direction and I really have some concerns about my own self-reliance. there's lots of mental health considerations in there. I think we've all been thinking about that. That is a topic that's been primarily coming out of COVID,

but it's much more than COVID. It's much more than COVID. It's the confluence of some of the things we've been talking about. It's this idea of, I do think there's a purpose issue too. People had real communities that they were attached to, whether that was from their religions or whether that was from companies that they worked with for two decades or whether that was a community that they lived in. People are much more mobile.

They're much more mobile. physically, career-wise, and socially. And so, like, what do they belong to? That is a real challenge that people are looking for. So I think that builds into that idea of community. Like, what is that? And if you can marry maybe some of those two things, that's pretty interesting. Do you think that the digital side of that has been good or bad?

Because I'm just reflecting on my own experience during COVID. And I think a lot of the mental health stuff for people is just this bizarre, like, almost dystopian existence we were living, just staring at this computer screen all day where like all this stuff was happening, but we were in the same room and we didn't touch anybody and it was just so bizarre. And I have the experience right now. I'm living with my in-laws are living with us as they're in the midst of a move. And it's been this lovely time of watching like multiple generations, them with my kids. It feels in many ways more natural than just like even the modern nuclear family,

just because there's more people and more perspectives and more touch and more of all these things. It's like the anti-COVID in some ways. How much do you think like the digital world is good or bad for a community versus it sounds like some of the anxiety you're describing as like a harkening back to a very old-school traditional community, a church or local town or school or whatever? Or the lack of that. Or the lack of that. So what do you think about digital's role in community?

Is it bad? I think like everything, there's two sides of the coin as a double-edged sword. It's not as simple as good or bad. There are definitely things from digital kind of. activity and community online that are incredible, or that definitely should be incredible in terms of people being exposed to broader reach for who they're connecting with and more ideas, maybe finding affinity groups that they wouldn't otherwise know how to access and finding some belonging there. But all too often, unfortunately, there seems to end up being fracture that

emerges in all of that. And I think that can dilute those experiences. Obviously, we all know all of the headlines that we're always talking about related to Twitter and Facebook and all of those things. So we're kind of living through that. But I think for people, they have this dual experience where you can go online, you can have all this community, you can belong to the big social platforms, you can post and get a lot of likes or comments or dislikes or whatever, but you can have engagement. You can have the niche groups. You can feel like I'm talking to people about something very specific, good, but then Friday tonight you're home by yourself. Very confusing, very jarring.

And so I think that these worlds still do exist in pretty separate ways. And that jarringness can be unnerving much more than it is sort of solidifying and grounding. How do you think about this for your kids? You know, my kids are of an age now where there's iPads and maybe even a few phones have started to sprinkle in. And honestly, I'm sort of terrified about it all. Mostly just because of the uncertainty. It just seems like it opens up like a variance that didn't exist before.

And I'm just curious how you think about it for your kids. And maybe we can extrapolate that into bigger trends about responsibility around these networks and everything else for young people specifically. I'm going to answer this question from a place of my internal optimist, which I also try to always bring my internal skeptic to as well. I look at my kids who are 12 and 8 and they've grown up with access to digital. They've seen us using it before they were using it. They've used it since the beginning. They're definitely, it has a place in their life. They are used to being able to say, I have a question or I want to contact somebody to

pick up my phone and do it. But the novelty of it isn't the same as it was for a generation that got introduced to this midway through and thought, oh my God, my life just changed. It went on hyper speed in terms of access, information, connectivity. for them, it's just part of the routine. And I don't think that it's better. I'm not going to go out and say it's worse, but I don't think it's better than real life.

If you ask most people, would they rather sit in a room with somebody? Would they rather be able to taste the food than look at the food? They would say yes. The ability to kind of embrace the on and offline world more holistically because you've grown up fluidly with it, hopefully will help us have a more natural relationship with it. Now, that's the optimist in me. The skeptic in me says the entire online world is full of gaming tricks that play to our mind,

and it's rewiring our young minds while they're in the process of being built, and that's very scary. And so I do think that then it becomes a conversation with parents and schools about like what sort of guidelines and rules do you put on technology. And that's no different than thinking about would we let our kids have access to drugs and alcohol before they're ready for it. No. But I do want to believe technology is a huge enabler.

It's made so many things better. And it's going to continue to make so many things better. Like you said, every one of these issues is so big, but also so complicated and two-sided. And there's so much opportunity wrapped up in this access that they've grown up with. And hopefully we can find ways to not let it ruin their minds. Make the best of it. Yeah. As we think now about, okay, so you're 10 years into the firm and you've invested in some,

incredibly well-known consumer brands, some incredibly well-known B2B businesses like Fair. So you've done an extremely good job as an investor historically. I would love to talk about what forerunner of the firm and you have learned about business models in the space you're interested in and also the characteristics of founders. And I don't know which order to go in, maybe I'll let you pick. What do you think is the more appropriate place to start so that we can build one on the other? They're interconnected in some ways for me as you're talking about it. But let me maybe go through a quick swat on criteria and then kind of double down on the founder

part of that list. Anytime we're approaching a particular investment or the decision on where to spend time, the first thing we're thinking about is, is there a market tailwind for this product service? Is there a user or a technology that is going to power this in a meaningful way? And that ties also to is somebody's life going to be better or their job going to be better because of it? And are they going to deeply care about this being there for them? Those are two ways to approach tailwinds. And I feel like the potential for the biggest outcomes sort of start with that.

Are you operating in the path of progress? Because you're going to fight so many headwinds along the way. You might as well start with the wind at your back if you can. That is a starting bucket of what areas or spaces are in or out. In terms of the business models, let's stick with the early stage. With our fund today, we can invest across the spectrum, but we've really made our mark at the early stage, and that's where we want to keep making our mark. The first thing we're thinking about is they're a clear viable entry point.

And I start with that as opposed to like our big business model is we're a marketplace because like everything's going to change or evolve along the way. So like you don't even get to get there if you don't get somewhere first. how are you going to enter the market and is what you're proposing to do viable, viable from an unreached standpoint, an adoption standpoint, an execution standpoint, that's a foundation. If we get past that, we let ourselves dream, if this works, what could it be and what advantages could exist in the context of this idea? The business model idea, is there a flywheel dynamic that could exist in this?

Is there something about the product or the user in way they're always? organized that can like build off of each other to create some network effects. That's obviously talked about a lot in venture business and it seems cliche, but it's really true in terms of being important. The business model might be scale. That's the less attractive business model, but there's the case for that in certain times. The question is, is like, what does it take you to get to scale and do you still have a good investment on the other side of it? And that's usually about time and dollars. You know, what element of it is inherently repeatable? So very hard. to make a business, at least in the framework that we think about or with the ambition we think

about work, if it's a want and done, whether you're a B2C or a B2B customer. We're really always thinking about what's the chance to keep growing and building those relationships. Is the product inherently lending itself to that? Is there some way about how you're packaging it or charging for it that makes sense to make it better, but also creates that repeat dynamic? But I don't get too caught up in all the details of the business model, because again, it's going to change over time, but you want to at least feel like, I know how it's going to get to market, and I feel like in this space, the other things I can point to the vision for the product, some of those dynamics are going to be able to be unlocked. And then for the team, again,

I think it's essential at every stage. Like if I'm making a public company investment, I still think who's the team, who's driving the ship? What's their vision for the future? Do they have buy and by there? Are they innovating as a group? What's their view on allocating resources and holding themselves accountable? All those things. But at the thing, The earliest stages, you're really trying to understand, does this team have a unique advantage that's going to enable them to do this better than any of usually the 10 teams that have come here and pitched some version of this before? Because there are very few super unique ideas. There are very few times someone comes in and blows your mind because they have suddenly

thought about something that nobody else has ever thought about. What does happen is somebody comes in and they've thought about something on some deeper level that's hit on different cords that have opened up maybe some of these business model ideas or whatever. And they have access to it because they have unique insight into that category. They have a unique skill set. So I can point to many, if not most or all of the founders that we've worked with in this regard. So for instance, in both curated and fair. You mentioned fair earlier. It's a B2B wholesale marketplace, but it's much more dynamic than that. It's really powering that whole ecosystem. through discovery, but then also access and ongoing business help.

Curated is a retail business, the retail marketplace, three-sided marketplace, brands, experts, and consumers, and it's human in the loop social commerce. Both of those businesses, those ideas or addressing those opportunities had been on our mind from this tail-of-win perspective. We'd met so many founders that had versions of. I think in each of the case, most of the part, the teams that we've talked with understood one side or both sides of the marketplace's problem. So they were versed on what was transformation that was happening in the category or needed to happen in the category.

They knew the problem said. They know the user said that they didn't know how to build it and bring it to life. And in those kind of businesses, you know, marketplace businesses where you're interlocking services on it, it is a tech project for sure. The team from Fair, Max, Marcello, Danielle, and Jeff, they came, they had worked together before. They worked at square. They incredibly relevant experience in small business that way. And they were also a combination of product, engineering, and data that really said, we've observed this problem. Max actually had lived the problem having a small business. But they were able to say, this is what it's going to take to build it from a tech perspective. And it was the first team we met that really understood

how ultimately this was a tech business and tech was going to make it viable. Same with curated. Four founding engineers and product people, the first 11 people were all engineers. They've been building an incredibly robust and complicated platform, honestly, to be able to do the right matching, the right recommending, kind of power the humans so they can be effective in a business model ROI positive way. Businesses wouldn't work if you didn't have tech behind it. A company like the yes, Julie Bornstein, the founder there, her unique advantage that she had was she had credibility in the space.

And she was going to need to bring a whole lot of brands along to a new business model. and get buy-in from them. And she couldn't launch with two brands. She had to launch with 300 brands. And it would be very hard to do that. If you weren't somebody that people looked at as an industry insider who had knowledge about what their concerns or views or hesitations might be and could also trust the opportunity she was laying out.

And then maybe just even in something that feels a little that's less about a very specific, well, it is a very specific skill. I think about founders like Emily Weiss and Michael Dubin from Gloucée and Dollar Shepububub. they had an insight into the head of their user. Other founders don't have. You can understand surface level. Oh, there's a white space. I'm this customer.

I know how to speak to them, et cetera, but it's different when you've kind of gone the next layer deeper and you can speak to like where you've engaged from and you know how to get into the head of them and to market to them.

So that's like a psychology advantage. So in each of those cases, there was some awareness of the opportunity in the market that I think our team already had from the fundamental research. that we do. And when that founder walked through the door and we were able to see that superpower strength that was absolutely critical to that business coming into life, other people pursuing it

didn't have that. And this could become their advantage. Let's go on in a big way. Seems like maybe at the extreme, the headwind and the tailwind spectrum, you can kind of tell. Maybe a headwind might be like you're not going to back a lot of newspaper businesses or something like that. But I'm really curious about like the middle part of that spectrum of how you know when you tip from headwind into tailwind or if the tailwind is strong enough. And maybe you could give an example of something where you don't have to name the company, but you passed on something as a result of thinking, either there's not enough tailwind here or there's some specific headwind that we can point to.

And that's the reason we're not doing this. Because I think everyone would agree, of course, a great tailwind and a great growing market will help a business evaluating it ahead of time. It seems really hard to me. So I'm curious how you do that and maybe an example of it causing you to pass. I think what you have to do is commit to understanding a few things. I do think trying to apply that as a generalist is really hard. But we sit around our table and think about, okay, here's the consumer.

Here's what we're hearing is changed or need is happening from the consumer. Where does that help direct our attention? And then we can start to funnel it down from there. And once you get clarity or passion or interest, belief there's an opportunity in an area, then you can spend all day thinking about all the things that are contributing. to like headwinds and tailwinds and usually diligence yourself out of something, by the way. But you have to have a little bit of, I'm just a true believer. This just has to happen in you.

But when does it diligence us out of things? I will preface this by saying that I would still like to find something to invest in this area. And there are probably companies that have potential. We just haven't been able to connect the dots yet. But in the area of resale, I think you can look at it. You can say there's a big tailwind for it in that people are waking up to waste. They're increasingly don't want to be part of waste. And so the idea of being able to recycle something or use something secondhand is growing

in its appeal in general. So there's a tailwind building there on the sustainability theme. There's also the idea that there's like so much of everything out there and people are still looking for something unique. So finding something used that makes it that much more unique because it's not on some billboard being advertised to everybody. So there's two big tailwinds there. When you look at how to execute something in that space, it's hard. It's one-offs. You negate some of that benefit with shipping. There are very specific things that make it challenging on a unit economic basis to say,

how does that business work long term. And so we've let the headwinds leave us on a sideline on something that we still think has a big tailwind behind it. The other thing you mentioned that's so interesting is the, I'll call it the beachhead problem of making sure the team is clearly focused on an entry point and not thinking too big at the start, maybe thinking big overall, but thinking small about what the next six months might hold. What have you learned about, I guess, what advice would you give to entrepreneurs that are building at that stage to encourage good entry point selection or good focus early on? What are the people that have done that really well, or I guess really poorly taught you about what's good and bad there.

Listen, I think that if you can find one way to articulate your value proposition or your connection to the consumer and it makes a statement that aligns with the bigger idea, that's awesome. There's a lot of these businesses, like, for instance, like, fair and curated where you can't just do one thing because you have to get a bunch of things working to actually make it possible. But like, let's take Dollar Shave Club, for instance. It's an old example, so I like to draw on newer things, but it's a really perfect one,

which is Michael Dubin never came in and pitched us a shaving company. I would have passed outright on a shaving company. I would have said there's a monopoly in this market, duopoly with billions of dollars to market in a low margin business. He pitched an idea that there was a fundamental shift happening in the consumer purchase journey, which was causing a repositioning of the wholesale and the retail market, that there was an opportunity to build a business in a better way in 2012 than what was existing in the market today, alongside a male consumer who was now having some awareness around a personal care routine

because they were online and they were learning about more stuff and they were starting to take shopping into their own hands because Amazon made it super easy so that even people who didn't like to shop or shopping, which sort of created more willingness for people to shop in their own hands who weren't shoppers before. So he was like playing into both of those things. And his entry point was the razor. But the vision was to address that consumer with a unique business model that was timely to the market. And you could probably build that out into infinity. Say, you start with razors and you go to the obvious shave cream, you go to the hair gel, and you go to that-da-da-da. Maybe someday you're selling a car. I don't know. He made a good strategic decision to

sell the company to a company that leaned into the personal care category. But the premise could have been built on for a lot longer. And what we bought into was the big idea about the change that was happening into retail and wholesale and the change that was happening in the demographic he was addressing. And the razor happened to be a perfect instrument because you can tell a really compelling story in a 30 second YouTube video where people were like, duh, yes, and got on board. Yeah. Got to be one of the most brilliant advertisements or whatever you want to call it. of all time, that original quote. People used to say to us all the time, like, that you invested in a YouTube video and it's like, I didn't even see the YouTube video. That's funny. We didn't even

see the YouTube video. This was about the change that was happening. And that really underpinned all of those early, you know, what had been called D to C companies, which I think is like a bad word, because very few companies are just direct to consumer. Most companies that have big ambitions that really want to be household names or prevalent in people's lives have to be where the consumer is. and sometimes that's direct and sometimes that's in other channels. But anyways, most of those early ones were all plays into this shifting dynamic that was happening between wholesale and retail and being able to approach it in a new business model. His insight specifically that you cited there of there's a new empowered way of buying things for this,

in his case, specific cohort of people. I'd love to hear the history as you've seen it of the consumer and how they buy and sell. Because I think early on in forerner's history, a lot of the thesis was predicated on this digital shift that was happening that really empowered the buyer. And I know you've thought more recently about that continuing to evolve and including the seller, maybe even seller is the dominant interesting force today. But maybe you could just tell us the story of your insights around where the shifts in power were in the consumer kind of buying landscape.

I would put this continuum that we've been investing on for the last 10 years. on a continuum that goes hundreds, if not thousands of years, if you've got to think about the evolution of shopping. So not to bore people, but to make it really quick. First, what we call shopping or commerce now was, I've got a coffee cup and you've got a, you have something I want and I have something you want and we decide to switch. That's like the first exchange. Over time, that led to, that's pretty inefficient because you don't always have what I want. So we need some currency. So let's put rice as the currency. We get turns into money, whatever. you start to have something to exchange as a medium for commerce, it's still all happening one-off.

Then you're like, well, it's kind of inefficient because now I got to like, no, all these individual people. So let's set up a market. So you get like a market, an outdoor market evolves from there into the corner store because now the market's gotten so broad that someone's like, you know what? I know what the hundred people that live near me want. I'm going to just edit this little store for what this group needs. And it's going to be much more efficient than going to the big market.

So you've got the corner store. over time, the corner store turns into the street where there's a bunch of stores on the street that gives way to the mall. You know, you can trace it all around. At some point, Amazon enters in the late 90s and this goes digital and it goes digital warehouse big time. And then you start to get tools and technology and people online in a way that you're like, well, I'm a small business provider. I can open up a business online too. And so then you've got the rise of what was called these D to C brands. And that's like another. evolution. For a minute, some people think, like, everything's moving online and whatever.

The continuum keeps going and people still want to go to stores. There's still reasons to go to stores. There's still reasons to do things in person. People like the personalization attention. Those digital brands go to stores. The stores need to get more specialized, et cetera, et cetera, all the way back down to one-on-one bartering. I'm skipping a lot of iterations of this. One-on-one bartering is possible today because of the way we're connected online, because of the payments infrastructure that's being built, because of the discovery, the readily accessible discovery, et cetera. And suddenly you can be like the single person at the market, but you can be online selling. And that's where it goes to this evolution of commerce is being

powered by the seller. It's really the long tail is now alive in the digital world. It needed to just start with the biggest players. It moved down to kind of some more innovative formats. When we launched Forer in 2012, we went with the initial. thesis of this revolution of commerce is starting with the buyer, which you referred to. And that was really being, the purchase journey was being changed by people having a digital phone in their pocket. And suddenly, hey, Patrick, you tell me about some cool new thing you bought. I pick up my phone in my pocket. I look it up. And I'm like, I should buy it right now here on the spot. But now it's gotten even more built out with more technology to power the infrastructure. And you can have individual

people be those kind of businesses. Could that second part be? summed up as breaking down or sharing back some of the benefits of scale to the big, big, you know, the Amazon's of the world. I think about how Shopify is trying to sort of offer its scale to very small merchants, for example. Is that the right way to conceptualize this? The barrier for sellers was scale players just had such insane advantage on price and speed and selection and this is reversing that somehow? And what's missing from that ecosystem? I don't think it's necessarily reversing it as much as it's just adding to the party, if you will, and it's enabling another group of people to compete in the digital realm.

If you think about what's missing from that, I've spent a lot of time on Shopify because I just really like the team there and think their product orientation is so interesting. Nonetheless, I'm sure they're not the be all end all for every merchant everywhere. What are the interesting trends? It could be companies could just be trends that you're seeing in this like seller empowerment era that we seem to be in right now that you think are interesting. Oh, there's so many takes on it right now. It's arguably like in that phase, there's a lot of noise.

A lot of people are trying different approaches. We got to kind of see what gets executed against well and what sticks. But as an example, I'll offer up curated. So curated, again, just really briefly, is a three-sided marketplace. It is powered by experts. So experts in this context are the company launched in outdoor sports. So let's stick with that right now. It's going to be rolling out all kinds of categories, but like skis.

Okay. So somebody, I heard it's going to be epic snow this year. a new set of skis, really been wanting for a while. I'm a little out of the loop on what to buy. I don't know what to buy. My corner store closed, the Amazon reviews, don't get anything out of them. You can go to curated and you get hooked up with an expert. And the expert in this case is somebody who, let's just create a picture of them, died in the will skier. They grew up on the slopes. They were there since they were two. They were a ski instructor at some point. They had a family. They needed to get a different job, but they just love skiing. They get on the slope.

every chance they get. And now they have a chance to be part of this curated community and give advice to people who are looking to buy skis from another skier, from somebody who's maybe skied on those skis or knows somebody who's skied on those skis because he was out on the slopes last weekend with somebody and can talk about it from a practical perspective, from a point of knowledge and a connection. That is the magic of retail that's been happening offline forever. There used to be people who really were professional salespeople.

Personal shopper or something. There are still today. I have tons of respect to them. There are still today. But there's also a shift in that industry. And it has a place online. And this is bringing it online. And it's an opportunity for somebody.

There are people there. They're making their livelihood doing that. Talking to people about the category or the hobby, the fly fishing they love. And they're assisting people and making purchase decisions. How does that business work from a, flow of goods standpoint. Is there an inventory component to the business? Is there a warehousing component? It's all virtual. That's why it's a three-sided marketplace. So you have the brands. The brands are hooked into the platform. That becomes sort of the universe and the catalog of products. And also,

while you're in the process of building a marketplace, they provide access to a broader set of products to, it's just different business models at different points in time while you're bringing the brands on board to the platform. But then that's the repository from which experts often are making recommendations from. A consumer has that engagement with the expert, makes a purchase on the curated platform. Curated puts the order out to the brand, the brand chips. I could think back to wirecutter, which I used to rely on a lot. That would be like a single expert channel. And this is basically a platform of wirecutters. It's a platform of wirecutters. It's a platform of wirecutters. And it's really cool and eclectic to see who's on there and participating and why and why they love it and

everything is really cool. So it's this idea of very few things are totally new. It's just the evolution of it. And it's possible today because the complicated technology that needs to exist to make this efficient is somebody smart can build it. And like, it's a lot. You have to come on as a consumer and share a few things about yourself, your interest level, your skill level, your past experience. And there is technology that is then helping to say, these are the three best experts, who's available to do it? And that's out of thousands that they choose down from to try to create efficiency. You couldn't do it if you were handpicking. I love the examples of curated and fair as like down the fairway obvious network effect driven businesses where there's a lot of

software enablement. That just seems like a great pure play venture style investments. If you think about companies like Glossier and Dollar Shave Club in a way, like what I'll call more linear product or brand is incredibly important. Not saying brand's not important than the other ones, but branded products. How different is the set of models investing heuristics or frameworks that you use to look at one versus the other? Because it just seems like I don't know which is harder, but they just seem very different. They are very different. And I think you'll meet some investors that are like, I spend all day, every day thinking

about SaaS software. I know everything about how to bring a SaaS software product to market and build sales teams, et cetera, know everything about marketplaces that I spend all my time doing. Here, we try to spend all our time thinking about where there's opportunity that's being fueled by consumer need and what dynamics are shifting in the context of the markets that they play in. So there's a bunch of things that people need. there's opportunity for a new product.

You can build a nice business. It's not a venture business. There's a lot of things. The majority of things that fall into like products and services are kind of in that bucket. But sometimes there's such a big structural shift in what's going on that there's an opportunity for someone to emerge and if you will show the industry how the future is going to look.

And if you can do that, you get some advantages. You have some headwinds. So this is a good example back to your headwinds, tailwinds. Your tailwind might be that you know the user's there for. it. You know you offer something that they need. You have that unique insight. That population's growing. You can look at that. You can say that, like, I understand structurally what's happening in this industry. There's a wholesale retail dynamic that's changing. But the headwind might be that it's all unknown. I don't know how to bring it to life. But no both early days and glossy early days. We'd have build all our own technology. That was not efficient. It's a lot more efficient to plug into Shopify. So these things are available today. So as a first mover, you have some disadvantages. But you weren't in a oversaturated advertising market. The consumer wasn't overly bombarded with messages. And the industry didn't have the skill set. If you could get all those things right, you might have liftoff, like another business that was competing alongside of you, would not, because you had really figured

out the future business model, and that powered you in a way that was an advantage. And the rest of the industry looked at you and said, I need some of that. In those cases, is it a standalone business that goes to distance over time, or is it an M&A target? I don't know. We're playing. We're playing. for both of those, but you can clearly see an opportunity for the excellence or the new skill set that's relevant to a big audience to drive some sort of activity in there. And not that there's not market dynamics that are fueling the other businesses. Those are, oh, you can see there's a market change happening and the business model itself becomes an advantage too. It's actually a lot of what keeps this business interesting is that there's not a playbook, as much as people want to

think there's a playbook. We've got frameworks that we work from and things that we look for, a big trick is to keep an open mind. If you start thinking that everything works like this company worked for that company worked, I don't know, only to a point until there's something new or different. You've invested in product categories that are far apart from each other in the consumer space, but all have tended to have very strong brands, at least in hindsight. I thought it'd be interesting to spend a few minutes talking about your take on brand, given how many amazing brands you've been associated with and helped grow,

and probably those that you've seen not work as well. And I know you're coming out with a big, really interesting report that we're looking forward to at the end of this year on a huge study that you've done on all these consumers and different brands around the world. So we won't steal the thunder from that report. But I'd love if you could introduce it maybe at the highest level, sort of the framework that you think might emerge from that. And then we'll talk about some case studies rather than talk about the specific framework and then look forward to what you publish later on this year. We have over time like teased out a view on that. but we really felt like we needed to take a step back, think about all of the lessons that we've learned, all of the observations that we've made, all of the reading that we've done around brands,

and say, what really makes a good brand? What is a framework that we might be able to use to help the companies that we're working with understand whether they're on a path to set the stage and foundation for building a great brand? And so through those efforts, we came up with six core tenants that we felt really underpinned brand. And again, this is like from a mosaic of inputs. And then we went about kicking tires and testing on that from every angle. So we started with our own hypotheses and our own research. We went and had interviews with people who are experts in the industry. So people that are leaders of some of the most well-known, recognizable brands and brands that we revere, we went and had conversations with people who

are the behind the scenes, brand whispers, if you will, working at, you know, agencies and have been doing this for decades across dozens or hundreds of brands. And we interviewed them along the criteria. We then went to consumers and we went to over 14,000 people over the course of this study to explore their impressions of these six criteria and their impressions of brands. And we started with a list of 100 brands. And we tried to get a real cross-spectrum of things that would be obviously on the list and things that might not obviously be on the list. But really, they were focused on businesses at scale that are more or less known because we wanted to also talk to customers and non-customers to really get a feeling for like, does it vary between customers

and non-customers? Can you actually build a brand and make a statement without having had a customer-first relationship? So we compared all of that information and ultimately got conviction around a framework, awaiting for a framework, and scored these brands and built what we think is a pretty comprehensive list of traits and rankings and explored the rankings from all different angles in addition to those on the matrix, like for instance, how big their businesses are, how fast their businesses have grown, et cetera. And it was really interesting and really fun. And I think it started to poke more questions and more explorations, which ultimately is like a

pretty big body of work and conversation around this. topic. If you could sum it up in like a simple idea that wouldn't betray the whole formula, how would you sum it up? A good brand delivers on its promise. A good brand has a clear directive around what relationship it wants to have with the consumers and the community at large, and it delivers on that in a consistent way across multiple or all touch points. So a point of view and consistency. is kind of what you're saying, which is pretty powerful. There's a list of kind of six criteria, but you're asking me to distill it down.

I think that the criteria help actually underpin that, which is to be consistent and reliable. If you think about foreigners history, what was the most defining moment in the entire business so far? Oh, my gosh, I've loved the last 10 years. It's been a fabulous journey that I definitely hope continues. This is a business that takes a long time to know whether you're good at it or whether you're successful. We're still reaching towards that. But there are milestones along the way that you can reflect on and feel like they demonstrate a level of success. Having an outcome, for instance, like a dollar shave club in your first four or five years was definitely like a huge needle mover

advantage. I came from out of the tech industry. I was new to the space. I was making it up as I went along, albeit in a very directed and focused way. But there were probably way more doubters that some of the ideas that we were investing behind could ever be something material than there were people that were like, yeah, that's a no-brainer over there. And what investment does not make anything you ever do again a no-brainer, it does prompt people to be like, oh, maybe they know something over there, or maybe there's, you know, some combination of things that are credible, could work or whatever. And I think that definitely with a meaningful inflection point along a series of things that I do think are building blocks.

You can't win without the building blocks because you can't put up consistency. If all you could talk about was one investment you made in your career, that's lucky. I really need to have a bunch, but you do need some luck at the right time that can really propel you and help you. On the other side of that coin, what is the hardest lesson that you've had to learn in foreign nurse history? I think it's something that I could have anticipated and I live it every day, which is this is a people business. It is. And I got into it because of the people business, by the way.

I was an investor trading stocks before and I wanted something that had more people in it. It's what fuels me and our whole team here. It is what makes it really rewarding. But it's what makes it also really challenging and it makes it really full. Right now, there's a lot of tough conversations happening around everybody's table. So I feel like we're thankful for having really incredible founders who are doing an incredible job navigating through going on three years of change in tough times. But in order to be successful through those times, you're having tough conversations and you're sometimes beating your head against the wall or you're dealing with any number of changes. And like the best part about this job is having rapport and being

close to the founders and being part of those conversations. And it could be taxing and draining over a period of time when a lot of that is happening, when you really care. That's a challenge. It seems like the upsides and the downsides in the investing business are so often people-related issues in the businesses themselves. Come on, that's life, right? That's what makes life meaningful is the relationships and the people you have. I mean, I don't know if this is a big surprise, but it kind of is. It's like, I got into this business because I love investing. I'm actually quite pleased with how happy or how much I'm enjoying building forerner and thinking about where are we today, where how can we set ourselves up to win in the future, the team dynamics, like how do we be a great place to work? how do we be the place founders want to work or want to partner with all those things all the time. How have you fostered and mentored other young investors at Forerunner?

So I really believe this has been a guiding principle at Foreigner's mentoring process, which is let's work closely together. Let's be in the room together. Let's have conversation and dialogue. Maybe it starts with somebody's there to help you take notes, let's just start with something really basic. But what you get on the other side of it is somebody is getting access to the conversation, they're processing the information. Probably if they have a chance of being successful, they're going to come out of that meeting and start asking you questions. You're going to get to see how they think.

You get to fuel it back. At some point, they get more confident you start debating. And like my thinking gets better while their thinking gets better, well, trust builds. That's really been our mentorship journey here, which is partnership. The simple apprentice model seems to work incredibly well in investing. What do you think the most underappreciated thing today? is about the consumer. Going back all the way back to where we started, having just done so much work and thinking on this, what do you think the world has not fully tuned into yet as a key trend?

The consumer is really savvy. Cannot fool the consumer. And there's a lot of people out there trying to fool the consumer all the time. And to build a business, a build a big lasting business, you have to be in partnership with your consumer. You have to treat them with respect. And you have to think about how do you do that while building a really great business. And when you can combine those two, I think you have a chance at longevity. And it sounds so basic and you're probably like, yeah, yeah, everyone thinks that, but not everybody operates from that place. And certainly not everybody executes to that place. How have you seen companies do that well in early product development? In the enterprise world, it's a fairly standard playbook to engage, you know, whatever five design partners,

lighthouse partners, whatever you want to call them, and give them something initial and then let them pull additional things out of you. And you can afford to do that because the contracts are so big, et cetera. Is there some similar user, customer, consumer development strategy that you've seen work well or people have a knack for those early products? Most things in consumer, it's more nuanced and there's many more levers in play than like, I've got this software platform. I've got to sell to these types of businesses. And I'm not knocking how hard that is to by any measure. But I know people are always like, oh, consumer, it's so hard or so unpredictable. It's true. It is. There's a lot of different things that you have to pull. I think that the companies in that

relationship building moment with their consumer are really approaching it holistically. They're really thinking about, is this the product that they want that they need? Am I delivering it in the way that they want that they need? Am I creating a brand of messaging is something that they want to associate with? All of those things are part of building that relationship over time and answering that call. It's so true. It's such a weird, hard business. I mean, a lot of the biggest businesses in the world. This is a very common mantra, and I fully believe it, which is the people who are customer obsessed. It gets tossed around a lot. So I think you need to go a little further and ask people like, what does that mean to them to be customer assessed? But like the easiest way to talk about it,

to answer your question is people who are customer obsessed at every level about building that work. You'll see why I'm asking the next question based on the term customer obsession. if you had to assign to young investors three businesses that they could go study the entire history of and the current state of play of in order to educate themselves about consumer businesses, what three companies would you pick? And I'm curious why for each. Oh, my God, that is a great question. No one's asked me that question. And you didn't hinted that question before. So the first thought that came to my mind is Nike.

There are so many ways in which you can follow the journey of Nike with incredible learnings. let's just even reflect on like something we've been talking about in this conversation, which is you have a big idea and you have a starting point. I mean, they launched a shoe, a running shoe. And now they are a global athletic brand that I think people do associate with shoes. They're the leading position there, but they associate it with just do it. They associate it with being active and being healthy. And they've done that through incredible articulation of that ambition through a broad

of product offering a broad distribution and reach strategy, a broad and compelling marketing strategy. And they've done it over 40 years. They're still a leader. There's no reason to believe they won't be in 10 years. So, like, that's amazing. Yeah, shoe dog also. Probably the best firsthand account of feeling your way through those early days. Yeah.

So what are you going to tell through young people? Read the shoe dog. Think about Nike and all its iterations and evolutions. All right. Give us two more. The risk of giving a generic answer, it's hard not to say Apple, considering how pervasive it is in people's lives. I can't think of any one company that I do as much business with, whether that's my phone, my computer, I mean, I probably have like four products right here.

I go home tonight. I turn on my Apple TV. I go to the Apple TV channel. I buy a show. It sort of blows your mind. But they've done an incredible job with their product journey and being consistent in that product journey with whatever they're doing. There's something you just know it's an Apple product. You can even know it's an Apple show. They've really hit the execution on all cylinder. across a growing and ever broader reach. So that's really impressive. I'm also going to bring it home a little bit. I'm saying something early,

but I think somebody will probably answer this question in two decades, like they answer Nike, but I think Warby Parker team has done an incredible job. They've created a whole feeling and an aesthetic, a look and expectation around glasses. Glasses have been around forever. I mean, people cared about the style. Do anyone ever know who made the glasses?

wear the glasses, I mean, anything besides what the prescription was in it and did it look good on my face, they really made a statement in the market in a category where nobody else did. And that's hard to do. That is hard to do. And they've done it, I think, really beautifully and in a way that feels, that has this great balance of feeling like someone who'd be like, oh, that's my brand. It speaks to me. It speaks to a very broad audience.

They have a broad and growing audience because there are a lot of different attributes to kind of attached to that I think you can feel a connection to, and that's important for a brand to not only have scale, but to have longevity. They're in the glass of this business, and I have no reason to believe, nor do I have any right to say, but that they're going to do anything other than glasses. But I bet you if they wanted to, they could. Nike in its first 10 years in it was doing shoes. Like, I don't know. What else can you do? But I think the brand and the setup lends itself well, and so does the execution that the company's had so far. It's so interesting to think about a business like Warby Parker or a brand like Figs is another example of like a category that's hiding in

plain sight. It demands one more question before my traditional closing question, which is around where you find these companies. Everyone talks about deal flow in our style of investing, but it's incredibly important. And I imagine in consumer where there's so much nuance and so much surface area, this is really important. And so how have you cultivated that forerunner? Like, where do these things tend to come to your attention from? And what have you learned about building an investment funnel or pipeline or deal flow funnel or pipeline that you think is repeatable into the future? Building a deal flow pipeline or engine is foundational and critical to this business.

As much as you want to think you've got some special eye and you're going to like, because you're knowledgeable, you know the right person, you're going to stumble on the right deal, like maybe, but no, you cannot build a business on that because you're hoping for luck. Seeing critical mass of companies and being able to pick from those is what you need to be set up for an opportunity. I think I've learned to really appreciate that over time. I got to answer the question a little bit with the journey because I started first just me by myself and I was trying to do so many things while learning on the job.

And again, in this framework of one plus one must equal something more than two, I was like, I can't blog, I can't. I have some time to network, but I got so many different kinds of networking to do that like just going to founder meet up and try to get people to care about what I had to say, that seemed really hard. So I was just like, got to find a few good founders and I got to show up for them. I got to do good work. And good founders, no other good founders. I am forever grateful to the first couple of founders that I partnered with in the context of Forerner. Bonobos, Andy Dunn,

Birch box team, the Warby Parker team, they became good friends. They became signals for other entrepreneurs in the space. They referred me to other people. And I just started building a network, like in the most organic way. And then I think I was investing in something that other people weren't as excited about. So that also made things just kind of come to me more readily. What I really had to work for as a team is to get beyond that, which is like, we're here to invest in the next generation of amazing technology companies. We want to compete with everybody up and down the spectrum of Sand Hill Road, so to speak. So how are we going to start to get relevancy there? And I think at that point in time, I had access to a lot more like network and connections and things. We've done all the

things that everyone else does. But when it comes right down to it, it's still about that. It's still about finding the few good people to work with doing good work because good founders, no good founders. That is important. I know there's a big push and I really believe it. I hope I'm part of driving it that this can't be a closed network business, that we have to be able to open the doors and be open-minded to who we're going to partner with. We have a lot of founders that had no prior connection to Silicon Valley, had no easy access to funding. We we were fortunate in partnering with those founders because our firm stood for something. Because we said, these are the types of companies that we're going to invest in.

I mean, listen, we're curious here. There's a diverse group of people who have interest in gaming and interest in farming and all kinds of things that we don't do. But we sit down every day and we say, what are the few things we can do? How can we do fewer things better? What are the areas we want to be known for? And we try to send direct signals or bat signals around that, mostly with our portfolio or how we're organizing what we invest in on our website.

to say, like, these are the things that we feel like we're proficient in, that we feel like we have the right to be a good partner to you. And when a founder literally comes to our email box, it has like an idea that fits into the context that, we are open-minded about that. And that's been an advantage for us. It's a lovely story. Work hard. It's a big part of the story, right? That is. And here's the other thing. You know, actually, this topic has been on our mind because I think it's something we could be better at. It's not realistic to go to every tech meetup. So, like, How are we going to get the kinds of opportunities? And we put a lot of strategy and thought into it.

And it's ever evolving. I mean, here's one of the other things. I'm grateful for this. Like, I didn't come to this business with a playbook. I've been feeling my way through it and trying to be deliberate and be specific about what we do and be nimble. Like the startups we invest in. Wake up every day with an open mind about how you're going to do something. Don't be wishy-washy.

Certainly, you'll get nowhere. But keep learning and growing and change. changing and following different branches and trying them out. And I think we love what we do. Like curiosity. Curiosity, I think, is a awesome trade to cultivate in your life. I try to do that with my kids. You're curious and passionate about the opportunity to partner with people and build new things. You can almost can't help, but you still have to like specifically work for deal flow. But what you're reading is part of that. You're interested in it. Who you're talking to, who you're drawn to, where you're drawn to going. It's sort of all works for.

simple way of saying is you end up investing where you spend your time and that's with people. That's what you're reading. Be very deliberate about how you spend your time. You're in the flow and everything gets a little bit easier because it's more natural. It's not easy. Startups are not easy. Founders have the hardest job. You know everybody thinks VCs don't work very hard, but it's a hard job too. I think it's a great job. It's an awesome job, but we work hard at it. I think you know my traditional closing question. What is the kindest thing that anyone's ever done for you? Like the big picture kindest thing that anyone's ever done for me is I have an incredible partner who I've been with for several decades when I said I really want to start forerner.

I want to throw my whole self into doing this just when we had a baby. I'm going to need you to be patient and I'm going to need you to be okay if I can't meet because I'm doing so many things. And he has stepped up to really support me and we've been a team in doing that. So it's hard not to say that when you ask that question. But I do have a other specific story that I like. which is I had a low moment before, I had a lot of low moments before I ever had a high moment. I'm definitely a believer in grid, you know, tenacity.

But one of these low moments was particularly low. Before I started Forerner, I did a number of different things. But one of them, I had a bunch of angel investments. And I had raised individual pools of capital SPVs. And I had about eight or nine of these. And one of them was very exciting. It was on the cover of a magazine. They were talking about it on CNBC.

It was an incredible team of people. people, and it was a big, bold idea. And 2008 happened. And we got caught in a funding moment. And collectively as a team, we just couldn't figure out how to rewrite the business plan fast enough to save ourselves. And the company went under. And I felt the pain of that loss on so many levels. And I felt so exposed because it was probably the highest profile one. I was convinced my career was over before it started. I went to lunch with somebody who I consider to be a mentor, Phil Schlein. He worked at USVP partners.

And I showed up in my sunglasses with my puffy eyes after I'd been crying. I left them on all lunch. I was really that crazy about my career. And I was that devastated at the time. And he started digging in and asking me all these questions about what happened, why did it happen? What could you've done differently? What did the team do?

And I answered them all. And he's like, you know what? Next time you have a deal you want to invest in, I'll angel invest. I'll invest. And I was like, what? I just lost money. And he said, yeah, you learned something. You know, all those topics we just went through. That's learning stuff that matters. It's going to make you show up in a stronger way next time. And that was just what I needed to hear because I could have crawled in my little hole and been done. Like, that's how bad it felt to me. But I was like, no, he's right. I can do it. What's nice about that story is it's something

that we can all do for everyone. And it's actually not that hard, but you have to think to do it. And it's great to hear the impact that it can have. Kirsten, I've loved learning. from you in the recent past, reading everything you put out, talking to you, getting to know you. I love this area of the market, even though it's not my area of expertise, and you taught me a ton. So thank you so much for your time. Thank you, Patrick. It's been an honor to be on your show. If you enjoy this episode, check out join colossus.com. There you'll find every episode of this podcast complete with transcripts, show notes,

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